The bravado is gone as the Eagle Ford Shale oil field shifts into efficiency mode

People attend Hart Energy's DUG Eagle Ford conference at the Henry B. Gonzalez Convention Center. Operators and analysts talked about the Eagle Ford Shale field as a workhorse asset that has decades of production ahead of it.

Photo: John Davenport /San Antonio Express-News

This is the state of the Eagle Ford Shale: Houston-based BHP Billiton Petroleum had 42 drilling rigs working in the South Texas oil field in 2012.

Now it has one or two.

“I call those the good times,” Jon Krome, head of continuous improvement at BHP, said of the early years of the field when companies like BHP rushed to get wells flowing. “Some people also call those the crazy times.”

The bravado is gone from the Eagle Ford now that oil prices have tanked, down from more than $100 per barrel in 2014 to $43.58 Wednesday. But at the Hart Energy DUG Eagle Ford conference and exhibition, held this week at the Convention Center in San Antonio, operators and analysts talked about the field as a workhorse asset that has decades of production ahead of it.

Krome, a speaker at the conference, said that despite the diminished drilling activity, the Eagle Ford remains a “gem” for BHP, especially its acreage in Karnes and DeWitt counties, where a deep formation called the Karnes Trough is recognized as the most coveted slice of the 400-mile field.

Richard Mason, chief technical director of Hart Energy, said the industry in South Texas has switched from a boom mentality to one of figuring out how to drill better, cheaper wells.

“The industry has moved from this land rush … scramble to get oil and gas out of the ground,” Mason said. Two years into the price collapse, and the market has been able to adapt, he said. “You concentrate on the best rock in the best plays. In the Eagle Ford, the parts that are viable are where innovations are taking place,” he said.

Several conference speakers said the number of mergers and acquisitions in the field could increase over the next six months.

Mark Meyer, managing director and head of research for Tudor Pickering Holt & Co., and Mark Sooby, managing director at Bank of America Merrill Lynch, who both spoke Tuesday, said they expect some large operators in the Eagle Ford to let go of parts of their acreage that they don’t plan to drill in the next few years. That would allow the companies to spend the money on either their core Eagle Ford land or deploy the money to the most fashionable place to spend drilling dollars these days, the Permian Basin.

But they said bargain basement prices are not likely to be found in South Texas.

Sooby said the average acquisition cost across the field has been $17,200 an acre.

He pointed to one of the larger, recent deals in the field as an example of its value. Houston’s EnerVest Ltd. in the last year has spent $1.3 billion acquiring assets in the Eagle Ford, and Sooby valued its April purchase of 8,568 acres from San Antonio’s GulfTex Energy at around $65,000 per acre.

“To me what it shows is the inherent value, the strategic value of the Eagle Ford stands the test of time, so even in the down cycle the values are still very strong,” Sooby said.

Most of the deals have focused on Karnes and DeWitt County — around $22.2 billion. The rest of the field has seen $23.2 billion in deals, Sooby said.

Production in the Eagle Ford likely will keep dropping for the immediate future as companies pull back spending, but the University of Texas at Austin’s Bureau of Economic Geology at the conference released new research on the field this week that indicated the Eagle Ford still has a long way to go.

UT said the field holds around 10 billion barrels of recoverable oil, though it laid out different scenarios for the next 30 years of oil field activity that vary by oil price, the cost of bringing wells online and technology — factors that are always changing. “This is very dynamic to look at,” Svetlana Ikonnikova, an energy economist, said during a presentation.

At $100 per barrel oil, the field would have 11.3 billion barrels of recoverable oil and around 93,000 wells. At $80 oil, it would have 10.9 billion barrels and 83,000 wells.

Jennifer Hiller covers the Eagle Ford Shale, the massive oil and gas field in South Texas. She previously covered real estate, development and architecture for the Express-News. Jennifer has worked at several newspapers across Texas, as well as at the Honolulu Advertiser and Arkansas Democrat-Gazette. She's a Houston native and a graduate of the University of Texas at Austin, where she received a degree in journalism.